Orocobre Set to Meet Long-term Increase in Lithium Demand

Lithium producer Orocobre (ASX:ORE,TSX:ORE) released its full-year financial results on Tuesday (August 28), saying it is well positioned to meet the expected long-term increase in lithium demand.

The Australia-based miner posted a record sales price of US$12,578 per tonne free on board for lithium carbonate produced at its Olaroz facility in Argentina. The company said that the price in the fiscal 2019 so far had averaged US$14,000 per tonne.

“Global market fundamentals for lithium have recently been questioned with decreases in Chinese spot market prices. While short-term price volatility is to be expected, it is important to note that the Chinese spot market is only a small part of the overall global market,” Richard Seville, Orocobre’s managing director, said.

“Additionally, long-term fundamentals remain intact with ongoing, and increasing support from government, regulators and consumers for the move to electrification of transport and installation of electrical storage systems,” he added.

Orocobre reached statutory net profits of US$1.9 million and had available cash of US$316.7 million at the end of the period.

At Olaroz, production reached a total of 12,470 tonnes of lithium carbonate — a 5-percent increase year-on-year. Meanwhile, total sales revenue increased 24 percent year-on-year to US$148.9 million.

“We’ve had record production, we’ve had record prices, we’ve had record profits and we’ve established ourselves as a high margin, low-cost lithium chemicals producer. And we did some transformative funding for our expansion project at Olaroz and our lithium hydroxide plant.

“So we’re in a great position to be expanding our production to feed the rapidly growing demand in the sector,” Seville told Fairfax Media.

Looking ahead, the miner is fully funded to develop the US$285-million Stage 2 expansion at Olaroz. The development will allow the company to increase production to 42,500 tonnes of lithium carbonate per year.

“We are also preparing to construct a 10,000 tonne per annum lithium hydroxide plant with strategic partner Toyota Tsusho (TYO:8015). The final investment decision process for both projects is expected to be finalized shortly,” Seville added.

Aside from Olaroz, Orocobre operates Borax Argentina, a boron minerals and refined chemicals producer, and has a 33.5-percent interest in Advantage Lithium (TSXV:AAL).

In a note to clients, Eight Capital analysts said the fiscal results had no surprises and continue to recommend Orocobre as a buy with a target price of C$8.70.

“Pond capacity has now increased ahead of production, Olaroz has positive operating cash flow and the lithium outlook is excellent,” they added.

Similarly, Credit Suisse analysts said Orocobre had delivered an “in-line result” and a stronger 2019 was projected.

On Tuesday (August 28), shares of Orocobre were up 5.81 percent in Sydney, closing at AU$4.37.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Advantage Lithium is a client of the Investing News Network. This article is not paid-for content.